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This is not good at all, folks, and it's not just a Europe story. As Joe Stiglitz told John and Chris last month, the U.S. is exposed to a European collapse via its banks (what did they loan? what derivatives do they hold?) and also via its consumer exports.
For example, here's Ben Bernanke saying that U.S. banks hold about $200 billion in European credit default swaps (CDS's). Are U.S. banks on the right side of those bets? And even if they are, what is the risk that the other side will actually pay off (something called "counter-party risk")?
Note also that if U.S. banks lost a good chunk of their $200bn, French and German banks would lose more, and that would ripple to our shores as well. I think this just scratches the surface.
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As I've said in many posts before, "Greater Europe" was an experiment bound to fail. I just didn't think it would happen this soon.
6 comments:
I don't know a damn thing about Portugal, but I think you retire in Greece and get benefits after 50 years of age. Maybe that's wrong. (?) If it's true, it's a ridiculous system.
Ireland had just gotten on its economic feet a few years back. I feel bad for them.
It's not that your posts are unpopular, it's just that, even as important as it is, economics, European economics, is zzzzzzzzzz....
Indeed, economics is eye-glazing but it's good for people to know who else is gonna have their hands in our pockets (indirectly through our banks) in the near future.
The only way that "greater Europe" would function would be if all of the states decided to surrender most of their sovereignty to a European government. That was never going to happen.
A loose confederation of sovereign states will always fall apart over time, for a crisis will come along and the central government will be powerless to address it.
A loose confederation of sovereign states is what the never-right-wing wants to turn US into. Swell.
@ Gordon ... exactly what I was thinking! Maybe it's just me but it sure sounds like that R's want to deconstruct the U.S. and re-form it as a very loose confederation of states. I keep short-circuiting as I hear super-patriots making plans for weakening the union and upping states rights and each state will be its own little kingdom. Does not compute. :(
Jay in N.C.
P.S. I like Fixer's European/Economic posts as I almost learn something when I read them. (I'm sort of dim and don't really get all of it but I think I get the general idea he's putting out.)
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